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Tenaris Announces 2014 First Quarter Results

The Financial and Operational Information Contained in This Press Release Is Based on Unaudited Consolidated Financial Statements Presented in U.S. Dollars and Prepared in Accordance With International Financial Reporting Standards as Issued by the International Accounting Standard Board and Adopted by the European Union, or IFRS

LUXEMBOURG--(Marketwired - May 1, 2014) - Tenaris S.A. (NYSE: TS) (BAE: TS) (BMV: TS) (MILAN: TEN) ("Tenaris") today announced its results for the quarter ended March 31, 2014 in comparison with its results for the quarter ended March 31, 2013.

Summary of 2014 First Quarter Results

(Comparison with fourth and first quarters of 2013)

Q1 2014

Q4 2013

Q1 2013

Net sales ($ million)

2,580

2,674

(4%)

2,678

(4%)

Operating income ($ million)

566

589

(4%)

554

2%

Net income ($ million)

428

408

5%

423

1%

Shareholders' net income ($ million)

423

409

3%

425

(1%)

Earnings per ADS ($)

0.72

0.69

3%

0.72

(1%)

Earnings per share ($)

0.36

0.35

3%

0.36

(1%)

EBITDA* ($ million)

718

745

(4%)

699

3%

EBITDA margin (% of net sales)

27.8%

27.8%

26.1%

*EBITDA is defined as operating income plus depreciation, amortization and impairment charges/(reversals)

In the first quarter, although we benefited from improving trends in the U.S. market and the usual seasonal effect in Canada, our sales declined 4% sequentially, due primarily to lower sales in the Middle East, following the exceptional level of sales we had in the fourth quarter of 2013, as well as in Mexico, Colombia and Venezuela. We maintained our EBITDA and operating margins at a high level reflecting operating efficiencies and a continuing good mix of products.

Cash provided by operating activities reached $612 million during the quarter and at the end of the quarter we had a net cash position (cash and other current investments less total borrowings) of $1.3 billion.

Market Background and Outlook

In the United States, drilling activity is picking up, particularly in the Permian basin, but during the first quarter drilling efficiencies were affected by the cold weather. Looking into the second half of the year, the final determination in the anti-dumping trade case will have an impact on our sales. In Canada, drilling activity in the first quarter was in line with the previous year and we expect that to continue through the year in accordance with the usual seasonal variations.

In Mexico, Pemex is concentrating on its most productive regions and reorganizing as the reform of the energy sector moves forward. We expect a recovery in sales in the second half as additional rigs are being contracted.

In South America, shale drilling activity is increasing in Argentina while, in Brazil, projects continue to be delayed and our sales of line pipe and OCTG products in Brazil will be affected throughout the year.

In the Eastern Hemisphere, drilling activity has been increasing led by the Middle East and deepwater drilling in sub-Saharan Africa. However, purchases of OCTG in the Middle East in the last few quarters have been at an exceptionally high level and we expect an inventory adjustment in the coming quarters, which should be partially compensated by higher sales in sub-Saharan Africa and other countries of the region.

Considering these various factors, we expect our overall results for 2014 to be in line with those for 2013.

Analysis of 2014 First Quarter Results

Tubes Sales volume
(thousand metric tons)

Q1 2014

Q4 2013

Q1 2013

Seamless

669

665

1%

657

2%

Welded

241

249

(3%)

289

(17%)

Total

910

914

(1%)

946

(4%)

Tubes

Q1 2014

Q4 2013

Q1 2013

(Net sales - $ million)

North America

1,085

1,019

6%

1,143

(5%)

South America

440

516

(15%)

595

(26%)

Europe

256

205

25%

268

(4%)

Middle East & Africa

536

628

(15%)

400

34%

Far East & Oceania

101

112

(10%)

82

23%

Total net sales ($ million)

2,418

2,480

(3%)

2,488

(3%)

Operating income ($ million)

561

585

(4%)

526

6%

Operating income (% of sales)

23.2%

23.6%

21.1%

Net sales of tubular products and services decreased 3% sequentially and 3% year on year. In North America, sales increased reflecting higher seasonal sales in Canada and higher onshore drilling activity from our customers in the Permian, partially offset by lower activity in Mexico. In South America, sales decreased due to lower OCTG sales in Colombia and Venezuela. In Europe, sales increased due to higher OCTG and line pipe offshore sales in the North Sea. In the Middle East and Africa, sales remained strong but declined from the exceptional level of the previous quarter, when we had a record level of sales to Saudi Arabia. In the Far East and Oceania, the decline in sales reflected lower sales of line pipe in the region and lower sales for Australian offshore developments.

Operating income from tubular products and services decreased 4% sequentially, mainly reflecting a reduction in sales, but increased 6% year on year. The year on year increase in operating income is mainly due to a richer mix of products sold together with improved operational efficiencies.

Others

Q1 2014

Q4 2013

Q1 2013

Net sales ($ million)

162

194

(16%)

190

(15%)

Operating income ($ million)

4

5

(20%)

28

(79%)

Operating income (% of sales)

2.8%

2.4%

14.5%

Net sales of other products and services decreased 16% sequentially and 15% year on year. The sequential decline in sales was mainly due to lower sales at our industrial equipment business in Brazil and of sucker rods, while the decline in operating income was mainly due to lower margins at our industrial equipment business in Brazil.

Selling, general and administrative expenses, or SG&A, amounted to $489 million, or 18.9% of net sales, in the first quarter of 2014, compared to $497 million, 18.6% in the previous quarter and $476 million, 17.8% in the first quarter of 2013.

Financial results amounted to a gain of $42 million in the first quarter of 2014, compared to a gain of $8 million in the previous quarter and a loss of $9 million in the same period of 2013. During the quarter we had a $51 million gain on foreign exchange results, mainly resulting from the Argentine peso devaluation (22.3%) on our short operative and financial position in Argentine pesos.

Equity in earnings of associated companies generated a gain of $19 million in the first quarter of 2014, compared to a gain of $12 million in the previous quarter and in the first quarter of 2013. These results are mainly derived from our equity investment in Ternium (NYSE: TX) and Usiminas (BSP: USIM).

Income tax charges totaled $199 million in the first quarter of 2014, 32.7% of income before equity in earnings of associated companies and income tax, compared to $202 million, or 33.8% in the previous quarter and $134 million or 24.6% in the first quarter of 2013. As in the previous quarter, our tax rate was negatively affected primarily by the effect of the Argentine peso devaluation on the tax base used to calculate deffered tax at our Argentine subsidiaries which have the U.S. dollar as their functional currency.

Results attributable to non-controlling interests amounted to gains of $6 million in the first quarter of 2014, compared to losses of $1 million in the previous quarter and of $2 million in the first quarter of 2013. These results are mainly attributable to NKKTubes, our Japanese subsidiary.

Cash Flow and Liquidity

Net cash provided by operations during the first quarter of 2014 was $612 million, compared to $427 million in the previous quarter and $556 million in the first quarter of 2013.

Capital expenditures amounted to $189 million for the first quarter of 2014, compared to $184 million in the previous quarter and in the first quarter of 2013.

At the end of the quarter, our net cash position (cash and other current investments less total borrowings) amounted to $1.3 billion.

Conference call

Tenaris will hold a conference call to discuss the above reported results, on May 2, 2014, at 10:00 a.m. (Eastern Time). Following a brief summary, the conference call will be opened to questions. To access the conference call dial in +1 877 474.9502 within North America or +1 857 244.7555 Internationally. The access number is "64180052". Please dial in 10 minutes before the scheduled start time. The conference call will be also available by webcast at www.tenaris.com/investors

A replay of the conference call will be available on our webpage http://ir.tenaris.com/ or by phone from 2:00 pm on May 2 through 12:00 am on May 9. To access the replay by phone, please dial +1 888 286.8010 or +1 617 801.6888 and enter passcode "11333713" when prompted.

Some of the statements contained in this press release are "forward-looking statements". Forward-looking statements are based on management's current views and assumptions and involve known and unknown risks that could cause actual results, performance or events to differ materially from those expressed or implied by those statements. These risks include but are not limited to risks arising from uncertainties as to future oil and gas prices and their impact on investment programs by oil and gas companies.

Consolidated Condensed Interim Income Statement

(all amounts in thousands of U.S. dollars)

Three-month period ended March 31,

2014

2013

Continuing operations

Unaudited

Net sales

2,579,944

2,678,305

Cost of sales

(1,527,034)

(1,645,432)

Gross profit

1,052,910

1,032,873

Selling, general and administrative expenses

(488,860)

(475,565)

Other operating income (expense) net

1,720

(3,723)

Operating income

565,770

553,585

Interest income

9,062

6,081

Interest expense

(13,003)

(13,909)

Other financial results

46,434

(1,381)

Income before equity in earnings of associated companies and income tax

608,263

544,376

Equity in earnings of associated companies

18,821

12,197

Income before income tax

627,084

556,573

Income tax

(199,065)

(133,856)

Income for the period

428,019

422,717

Attributable to:

Owners of the parent

422,505

424,777

Non-controlling interests

5,514

(2,060)

428,019

422,717

Consolidated Condensed Interim Statement of Financial Position

(all amounts in thousands of U.S. dollars)

At March 31, 2014

At December 31, 2013

Unaudited

ASSETS

Non-current assets

Property, plant and equipment, net

4,754,390

4,673,767

Intangible assets, net

3,027,964

3,067,236

Investments in associated companies

932,822

912,758

Other investments

1,816

2,498

Deferred tax assets

201,401

197,159

Receivables

209,129

9,127,522

152,080

9,005,498

Current assets

Inventories

2,705,667

2,702,647

Receivables and prepayments

199,777

220,224

Current tax assets

134,675

156,191

Trade receivables

2,064,390

1,982,979

Available for sale assets

21,572

21,572

Other investments

1,531,776

1,227,330

Cash and cash equivalents

659,765

7,317,622

614,529

6,925,472

Total assets

16,445,144

15,930,970

EQUITY

Capital and reserves attributable to owners of the parent

12,724,313

12,290,420

Non-controlling interests

136,992

179,446

Total equity

12,861,305

12,469,866

LIABILITIES

Non-current liabilities

Borrowings

175,894

246,218

Deferred tax liabilities

744,204

751,105

Other liabilities

281,510

277,257

Provisions

70,925

1,272,533

66,795

1,341,375

Current liabilities

Borrowings

736,213

684,717

Current tax liabilities

320,600

266,760

Other liabilities

305,367

250,997

Provisions

26,509

25,715

Customer advances

102,592

56,911

Trade payables

820,025

2,311,306

834,629

2,119,729

Total liabilities

3,583,839

3,461,104

Total equity and liabilities

16,445,144

15,930,970

Consolidated Condensed Interim Statement of Cash Flows

Three-month period ended March 31,

(all amounts in thousands of U.S. dollars)

2014

2013

Unaudited

Cash flows from operating activities

Income for the period

428,019

422,717

Adjustments for:

Depreciation and amortization

152,664

145,370

Income tax accruals less payments

70,790

15,213

Equity in earnings of associated companies

(18,821)

(12,197)

Interest accruals less payments, net

(8,099)

(30,725)

Changes in provisions

4,924

3,134

Changes in working capital

16,660

16,321

Other, including currency translation adjustment

(34,293)

(4,168)

Net cash provided by operating activities

611,844

555,665

Cash flows from investing activities

Capital expenditures

(189,045)

(183,885)

Advance to suppliers of property, plant and equipment

(28,651)

7,746

Investment in associated companies

(1,380)

-

Loan to associated companies

(18,748)

-

Proceeds from disposal of property, plant and equipment and intangible assets